A Quick Rundown of Capital Gains Taxes

I have a couple of helpful tips for you about capital gains taxes. For example, the amount you are exempt from changes depending on whether you’re married or not.

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The number one question I’m asked by home sellers is about the kind of taxes they’re going to have to pay to close their transaction. First off, I’m not an accountant, and you should consult with yours before you make any financial decisions. However, I do want to talk to you a little bit about capital gains taxes.

Capital gains refers to the difference in money between the purchase price of a home and what you end up selling it for. Let’s say, for example, you purchased a $250,000 house and sold it for $500,000, the capital gains on that property would be $250,000.

You can reduce your capital gains by keeping track of your cost basis, aka how much money you put into improving the home. Let’s say you put $50,000 of improvements into that same $250,000 home and end up selling it for $500,000. With a new cost basis of $300,000, the capital gains would only be $200,000.

This is important because as an individual, you can become exempt for up to $250,000 in capital gains taxes. If the home is your primary residence and you’ve lived there for two of the last five years, you qualify. If you’re a married couple, you’re exempt for up to $500,000 in capital gains taxes.

The only caveat is that you can’t have sold a home within the last two years and used the capital gains exemption. There are a few exceptions to that rule as well.

Consult your tax professional before making any decisions.

I know this topic can get a little confusing. If you have any additional questions, I advise you to seek out a tax professional. We’d be more than happy to connect you with one if you just want to give us a call.

If you have any other real estate related questions, we are always here to help. We look forward to hearing from you soon.

How Is Our Real Estate Market Changing?

A lot can happen in a month in our real estate market, let alone a year. Here’s how things have changed.

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I’ve got a quick update for you. The spring market is upon us and inventory levels are still very low. That’s driving prices up in certain areas, as well as driving sales down.

From January to February of this year, sales dropped by about 3.7%. However, sale numbers are still 5.4% higher than they were at this point last year. Inventory is 6.4% lower than it was at this time last year.

Right now in the Northeast, we are seeing a sharp 13.8% decline in sales from last year due to this low level of inventory.

First-time buyers make up a large portion of the market.

First-time homebuyers make up a large segment of our market. Right now, they make up about 32% of buyers. In the price ranges they are looking in, mostly under $300,000, we are seeing multiple offers and bidding wars because there are not a lot of properties out there for those buyers to choose from.

Last year, we had about 1,600 homes on the market, but only have 1,100 on the market right now. If inventory continues to drop, prices will continue to go up.

If you have any questions for us about the market or about real estate in general, give me a call or send me an email today. I would love to hear from you.

How Can You Keep Good Credit Health?

Here are some facts you need to know about your credit score and how you can keep good credit health.

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How is your credit score determined? How can you keep yours healthy?

There are three different agencies that keep track of your credit score: Experian, Equifax, and TransUnion. Your credit score can vary between 300 and 850, which is a big difference in terms of minimum and maximum because each agency has a different minimum and maximum.

There are five different factors these agencies examine in determining your credit:

1. Your payment history (if you’re paying on time, how often you pay, etc.).
2. Your debt amount.
3. The length of your credit history.
4. The different types of credit you have.
5. Your recent credit application history.

There are two different types of credit pulls you can have done on your credit report: a “hard” pull and a “soft” pull. A hard pull is when you apply for a loan and you have to give agencies permission for the pull. A soft pull is when they don’t need your permission. This leads to you getting solicitations in the mail about credit cards—the agencies do soft pulls to see what your risk factor is.

With a hard pull, if you apply for a car loan or a home mortgage and within a 45-day period have five or six different people pull that credit report on a hard loan, that doesn’t necessarily lower your score. If it does, it’s very minimal because they realize you’re shopping the rate around.

Your score can be different with the three core reporting agencies because not everyone reports to all three different agencies. They also have different algorithms they keep to determine and track your score. To keep good credit health, pay down your debt as much as possible, don’t use more than a third of your revolving credit on your credit cards, and pay on time.

You should pull your credit report at least once a year.

It’s always a good idea to pull your credit report at least once a year. It has no detrimental effect on your credit score and it allows you to see if there are any discrepancies on it and dispute them if so. If you elect to dispute any discrepancies, you’ll want to do so not only with the reporting agency but also the person or entity that reported the discrepancy.

If you have any questions about your credit score or have a topic in mind you’d like to see me discuss in a future video, please feel free to give us a call or shoot us an email. We’d be happy to speak with you!